Janice Gan provides an overview of the implications for housing developers from the recent amendments to the Housing Development (Control & Licensing) Act 1966
The Housing Development (Control & Licensing) Act 1966 (“HDA”) is an Act to provide for the control and licensing of housing development in Peninsular Malaysia as well as protecting the interest of purchasers of residential property still under construction.
The HDAA 2012 was gazetted on 9th February 2012 and came into force on 1st June 2015 simultaneously with the Strata Titles (Amendment) Act 2013 and the Strata Management Act 2013. Implementation of such Acts are supplemented by corresponding regulations, namely the Housing Development (Control & Licensing) Regulations 2015 (“HDR 2015”), Housing Development (Housing Development Account) (Amendment) Regulations 2015, Strata Management (Maintenance and Management) Regulations 2015 and Strata management (Strata Management Tribunal) Regulations 2015.
Salient Amendments Made to the HDAA 2012 and HDR 2015
The amendments made to the HDAA 2012 and to the HDR 2015 result in more stringent rules being imposed on the developer:-
1. Section 3 of the HDAA 2012 – Interpretation of “housing developer”
The definition of “housing developer” has now been expanded to include a person or body appointed by a court of competent jurisdiction to be the provisional liquidator or liquidator for the housing developer in the event the housing developer is under liquidation.
The liquidator shall now be subjected to all duties imposed on the housing developer under the HDA in particular Section 22D(4) of the HDA where it is now clear that the liquidator is only allowed to impose or charge its administrative fee not exceeding fifty ringgit for meeting every request for confirmation of its records in the register of the housing accommodation whenever requested by a purchaser under the sale and purchase agreement, prior to issuance of the separate/strata title of the said housing accommodation.
2. Section 6 of the HDAA 2012 – Condition or restriction for the grant of a license
The deposit for obtaining a developer license to engage in, carry on, undertake or caused to be undertaken a housing development under the HDA has now been increased from RM200,000 to 3% of the estimated construction costs where the estimated construction costs has been defined in Section 6(1B) of the HDAA 2012 as the cost of constructing a housing development and includes financial costs, overhead costs as well as all other expenses necessary for the completion of the housing development but excludes land cost.
3. Section 7B of the HDAA 2012 – Licensed housing developer for the purpose of Sections 7, 8, 8A, 11 and 12
The insertion of Section 7 into this amendment allows legal action to be taken against the housing developer who commits an offence under Section 7 where its housing developer’s license has expired but the housing project has not been completed at the time the offence was committed.
4. Section 8A of the HDAA 2012 – Statutory termination of sale and purchase agreements.
The amendment of Section 8A now enables individual house buyer to terminate the sale and purchase agreement in the event of the following:-
• The housing developer refuses to carry out or delays or suspends or ceases work for a continuous period of 6 months or more after the execution of the sale and purchase agreement;
• The house buyer has obtained the written consent from the end financier; and
• The Controller has certified that the housing developer has refused to carry out or delayed or suspended or ceased work for a continuous period of 6 months or more after the execution of the sale and purchase agreement.
The house buyer is thus no longer required to obtain written consent of at least 75% of all purchasers and to obtain approval from the Ministry of housing and the Local Government to terminate the sale and purchase agreement.
5. Section 16AD of the HDAA 2012 – Criminal penalty for failure to comply
The HDAA 2012 increases the penalty for any person who fails to comply with an award made by the Tribunal within the period specified by the Tribunal under Section 16AD from not less than RM5,000 but not exceeding RM10,000 to not less than RM10,000 but not exceeding RM50,000.
6. Section 18A of the HDAA 2012 – Offences relating to abandonment of housing development by a licensed housing developer
The HDAA 2012 further introduces a new section 18A which provides that any housing developer who abandons or causes to be abandoned a housing development or any phase of a housing development shall be convicted of a criminal offence to a fine which shall not be less than RM250,000.00 or to imprisonment for a term not exceeding 5 years or to both.
A housing developer who refuses to carry out or delays or suspends or ceases work continuously for a period of completion as agreed under the sale and purchase agreement consider as “abandons” under this section.
7. Section 24 of the HDAA 2012 – Powers to make regulations
The maximum penalty against housing developers for any act or omission in contravention of any of the regulations under Section 24(2)(g) of the HDAA 2012 has been increased from RM20,000.00 to RM50,000.00.
8. Regulation 4 of the HDR 2015 – Renewal of a housing developer’s licence
The time line for the housing developer to renew the housing developer’s license has been shortened from not later than 60 days before the date of expiry to not later than 14 days before the date of expiry. The housing developer is required to renew the housing developer’s licence until the Certificate of Completion and Compliance for the housing project is granted.
9. Regulation 8 of the HDR 2015 – Advertisement shall not contain certain description
A new sub-regulation 8(1A) has been introduced where any advertisement made by a housing developer shall not contain the following:-
• Offer of free legal fees;
• Projected monetary return gains and rental income;
• Claim of panoramic view;
• Travelling time from housing projects to popular destinations; or
• Any particulars to which a housing developer cannot genuinely lay proper claim.
10. Regulation 11 of the HDR 2015 – Contract of Sale
The amended sub-regulation 11(2) has expanded the prohibition on collection of any payment whatever name called except as prescribed by the contract of sale and such prohibition is also applicable to stakeholders.
Conclusion
The HDA has gone through many rounds of amendments and the government has imposed more rigorous rules and regulations on the housing developer under each amendment. The latest amendment of HDAA 2012, the abovementioned Acts and the corresponding Regulations encourage the position for only serious housing developers who have a strong financial position to continue to subsist in this industry where home buyers now have greater protection.
Contact:
Janice Gan – janicegan@cclc.com.my
Christina Chia – ccle@cclc.com.my
CCLC Corporate and Commercial (Real Estate) has vast experience in housing development projects, tenancies and advisory on real estate transactions.